AT&T Corp. (American Telephone & Telegraph)

Published on September 15, 2003.

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AT&T was started in 1885 as a division of the American Bell Telephone Co., the primary local-telephone service provider in the U.S., to provide long-distance service as part of an interconnected national communication system. By 1907, the company had consolidated virtually all of its long-distance competitors under the AT&T banner and was declared a regulated "natural monopoly" in 1912.

In addition to phone service, the company also was involved in broadcasting and invented the system of advertiser-supported commercial broadcasting that is common today in the U.S. and many other countries. At its introduction, radio was a dazzling technical accomplishment but presented no clear source of profit. In 1922, AT&T moved its New York radio station WEAF to a broadcast model that mimicked its toll-based phone business: Anyone wishing to reach the public could buy time on WEAF and use its airwaves. AT&T thereby allowed commercial radio to become a common carrier in the business of selling time. The model made station ownership profitable and freed owners from the task of creating programming, which became the sponsor's job, working through an ad agency.

In 1908, AT&T retained N.W. Ayer & Son as its principal advertising agency, adding, Newell-Emmett Co. several years later. Both relationships continued through the 1970s.

Although AT&T was a monopoly with no need to fight competitors for market share, it used advertising to help build familiarity and trust with its business and residential customers. For AT&T, successful advertising was advertising that protected it against latter-day trustbusters. The company maintained a high-profile corporate ad schedule in magazines and business publications such as Fortune. It also used radio consistently. Beginning April 29, 1940, and continuing for the next 18 years, it sponsored "The Telephone Hour" on NBC (the "Bell Telephone Hour" after 1942). The program moved to TV in January 1959, enabling the company to project a meticulously crafted corporate image of trustworthiness.

After the breakup

During the 1970s, AT&T faced various antitrust cases that culminated with the breakup of the company on Jan. 1, 1984. AT&T was then restricted to two primary businesses: manufacturer of telecommunications equipment and long-distance telephone service provider.

In 1979, Ayer had created one of AT&T more memorable taglines: "Reach out and touch someone." Accompanying visuals echoed the emotional appeal. But following the breakup, AT&T began to face increased competition in the long-distance market. The company changed its advertising strategy and began to challenge its competitors.

By 1989, AT&T, U.S. Sprint and MCI were engaged in a price war. AT&T's "Put It in Writing" campaign hinted that consumers would be wise to check into competitors' savings claims. AT&T's follow-up campaign, "The Right Choice," featured actor Cliff Robertson as spokesman. After a $1.7 billion loss in 1988, AT&T rebounded with a $2.7 billion profit in 1989.

During the 1990s, AT&T sought to diversify, launching its Universal credit card with support from programs promoting card use. "True Rewards" for example, let cardholders earn points (redeemable for frequent-flier miles or AT&T calling minutes) based on the dollar amounts they charged.

Federal Communications Commission rulings in 1992 increased competition in the 1-800 number market, and AT&T faced another challenge. MCI introduced its 1-800-COLLECT service with ads that did not mention MCI. AT&T responded with 1-800-OPERATOR.

In 1993, AT&T launched the "You Will" corporate teaser campaign for service innovations such as teleconferencing and introduced its "i" plan, with individualized packages of services such as fax mailboxes and Universal credit cards.

Competition among the "Big Three" continued with ad campaigns for various calling plans as well as calling cards. AT&T introduced the PrePaid Card, while Sprint offered "Long-distance Greetings." At the same time, each company touted a calling plan: AT&T promoted "True USA," MCI introduced "Best Friends" and, in 1995, Sprint offered "Sprint Sense," in which long-distance calls during the evenings and on weekends were 10 cents per minute.

Also in 1995, AT&T acquired McCaw Cellular Communications, which provided a foothold for it in wireless communications via a new business unit, AT&T Wireless Services.

Competing in the 1990s and thereafter

AT&T reorganized in 1995, splitting off GIS, its computer manufacturing division, and Lucent, a telecommunications equipment producer. AT&T continued to provide long-distance phone service, credit cards and wireless service, and introduced a brand extension: WorldNet, an Internet service provider.

From 1995 to 1997, AT&T's principal agencies were McCann-Erickson Worldwide Advertising; Young & Rubicam; and Foote, Cone & Belding. But in 1997, AT&T consolidated its business at Y&R and FCB. Advertising tactics in the late 1990s varied, but included commercials targeting cost-conscious consumers. One AT&T campaign introduced Lucky Dog Phone Co., a wholly owned subsidiary of AT&T that competed against other "dial-around" services. Lucky Dog used the dial-around number 10-10-345 to counter MCI's popular 10-10-321. (Taking a page from MCI, AT&T's name was not mentioned in the Lucky Dog ads.)

By 2000, AT&T had merged with cable company TCI, entered into a joint venture with British Telecom and sold its credit card business to Citibank. It was expected that the merger would enable AT&T to deliver data, video and conventional telephone services over a single line.

In October 2000, the company once again announced a corporate restructuring, this time splitting into four separate businesses: AT&T Broadband, AT&T Business, AT&T Consumer and AT&T Wireless, whose mlife wireless network was introduced by Ogilvy & Mather, New York, during the 2002 Super Bowl.

In November 2002, David Dorman took over as chairman-CEO, and the company sold AT&T Broadband to Comcast Corp. With the telecom battles shifting from the booming wireless market to bundled offerings, Mr. Dorman announced plans to turn AT&T into a virtual full-service telecom company again, with wireless, broadband, local and long distance offerings from other providers but under the AT&T moniker. AT&T also took the lead and put its muscle behind VoIP, voice over Internet protocol, which allowed cheap calls over the Internet.

In 2002, AT&T Corp., made up of AT&T Business and AT&T Consumer, was the No. 35 U.S. advertiser with $815.1 million in ad spending, down 7.1% from 2001.

In 2004, the company announced a $200 million marketing effort repositioning AT&T as the "world’s networking company." Yet 2004 also marked a down point for the brand when the Dow Jones Industrial Average bumped AT&T in favor of Baby Bell Verizon Communications.